Overview The USA Economic Weekly Leading Index (WLI) dipped -0.3 to a 56-week low of 121.9 (preliminary) for the week ended September 23, 2011. This is the lowest reading since the WLI was 121.9 for the week ended September 3, 2010. This was the 7th decrease in the past 8 weeks.

Cycle History The recent short-term low is the current 121.9 (preliminary) for the week ended September 23, 2011, which is a 56-week low. The recent short-term peak was 131.9 for the week ended April 15, 2011. The Weekly Leading Index reached a Post-Great Recession peak of 134.9 for the week ended April 30, 2010. A Great Recession low of 105.4 was set for the week ended March 6, 2009.

Weekly Leading Index (Chart) Below is a chart of the ECRI Weekly Leading Index, including the intermediate-term low of 120.3 for the week ended July 9, 2010, through the latest week reported.

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USA Annualized Growth Rate

Overview The WLI Annualized Growth Rate (AGR) dropped -0.5% to a 52-week low of -7.2% (preliminary) for the week ended September 23, 2011. This is the lowest reading since the AGR was -7.6% for the week ended September 24, 2010. The AGR has had 8 consecutive, significant weekly drops. The Annualized Growth Rate had been positive for 35 consecutive weeks before turning negative the past 8 weeks. The AGR has decreased or been flat 19 of the past 23 weeks, including decreasing 11 consecutive weeks from April 22 through July 1.

Trend The short-term trend continues downwards and is now negative. The intermediate-term trend continue downwards. The long-term trend continues level.

Cycle History The recent short-term peak was +8.1% for the weeks ended April 15 and 22, 2011. The recent short-term low is now the current -7.2% (preliminary) the week ended September 23, 2011. The Annualized Growth Rate reached a Post-Great Recession peak of +27.8% for the week ended October 9, 2009. A Great Recession low of -29.8% was set for the week ended December 5, 2008.

Annualized Growth Rate (Chart) Below is a chart of ECRI WLI Annualized Growth Rate, including the intermediate-term low of -10.9% for the week ended July 23, 2010, through the latest week reported. The AGR became negative in early June 2010 and remained negative for 28 consecutive weeks. The AGR was then positive for 35 weeks (from the week ended December 17, 2010 through the week ended August 12, 2011). The AGR reversed to negative beginning the week ended August 19, 2011.

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Commentary Overall, the both the Weekly Leading Index and the Annualized Growth Rate continue decreasing and are at or beyond 1-year lows. Gains previously attained have eroded. The WLI has been below the now distant benchmark 130.00 level for 20 consecutive weeks and the AGR has been below the 0.00% benchmark for 6 consecutive weeks. The Weekly Leading Index and Annualized Growth Rate overall continue at levels that indicate any future economic growth is becoming difficult, if not questionable. Both the levels and trend are worrisome. In addition, both are descending closer to the July 2010 intermediate-term lows. Per the ECRI, the Weekly Leading Index projects forward approximately 6 months and the Annualized Growth Rate is relative to the WLI and a 4-week moving average.

U.S. Recession Ahead Co-Founder and Chief Operations Officer of ECRI, Lakshman Achuthan, says an American Recession is ahead. "Contagion in the forward-looking indicators" is the reason for Achuthan's recession announcement and "why it is now inescapable". Further, "it is wildfire in the leading indexes" and this includes at least a dozen indicators. "When you have that kind of contagion, it is going to be pronounced, pervasive, and persistent and you are going to have a vicious cycle down that you cannot escape". He also states this is not a double-dip recession, but a discrete event, a discrete recession. The recovery since the Great Recession has been "underwhelming". Achuthan says it is too early to tell whether this recession will be shallow or deep.

About Lakshman Achuthan Co-Founder and Chief Operations Officer of ECRI, Achuthan is the managing editor of ECRI's forecasting publications. He is also a member of Time magazine's board of economists and the Levy Institute's Board of Governors, and serves as a trustee on the boards of several foundations. He received an undergraduate degree from Fairleigh Dickenson University in 1989 and a graduate degree from Long Island University in 1991. Achuthan joined Geoffrey H. Moore at Columbia University's Center for International Business Cycle Research in 1991. In 2004, he co-authored Beating the Business Cycle: How to Predict and Profit from Turning Points in the Economy.

Index of Consumer Sentiment, University of Michigan, Ann Arbor (September 30, 2011)Consumer confidence improved in September, although it is still quite weak and remained below the year earlier reading. Most of the gain was due to consumers shifting from anticipating an even worse economy to expecting the economy to stagnate at its current depressed level. The majority of consumers expected their personal finances to remain unchanged, the same dismal pace of economic growth, and no improvement in the unemployment rate during the year ahead, The Expectations Index still points toward the likelihood of a renewed economic downturn at worst, and at best, indicates growth in consumer spending that will be too slow to enable any improvement in the jobs situation.

Commenting on the Survey Surveys of Consumers Chief Economist, Richard Curtin: “Although the small September gain still left consumer confidence at low levels, the more troublesome finding was that consumers have come to anticipate economic stagnation as the most likely outcome over the longer term. Whether it’s their own diminished income expectations, the inability of the economy to generate a sufficient number of jobs, or uncertainty about future taxes, spending and entitlements, the most probable outcome expected by consumers is a prolonged period of economic stagnation. Rather than spending more and taking on new debt, consumers are intent on rebalancing their finances to prepare for a new economic era.”

Trend The Index of Consumer Sentiment increased +3.7 to 59.4 (revised) after 3 consecutive monthly decreases in June, July, and August of -2.8, -7.8, and -8.0, respectively. Therefore, the short-term trend, intermediate-term trend, and the long-term trend continue downwards.

Cycle History The current September 2011 Index of Consumer Sentiment is 59.4 (revised) and is just above the Great Recession low of 55.3 in November 2008. Consumer sentiment reached a Post-Great Recession peak of 77.5 in February 2011, just before oil prices spiked up. February 2011 was also the peak of several other economic indicators for the USA. A Pre-Great Recession peak of 96.9 was reached in January 2007. In 2004 the index was greater than 100.

Consumer Sentiment Index (Chart) Below is a multi-year chart of the Reuters/University of Michigan Index of Consumer Sentiment through the latest month reported.

Consumer Sentiment 6-Month Moving Average (Chart) Below is a multi-year chart of the Reuters/University of Michigan Index of Consumer Sentiment 6-Month Moving Average through the latest month reported. The previous chart above, the Index of Consumer Sentiment, is rather like following the bouncing ball when charting human sentiment, confidence, mood, and outlook regarding the USA economy and their own individual prospects. Therefore, the 6-month moving average chart smooths out these short-term ups and downs and provides an intermediate-term perspective. The Pre-Great Recession peak was in May 2007 at 90.6 while the Great Recession low was in March 2009 at 58.0. The Post-Great Recession peak has been in June 2010 at 73.9 and the recent peak has been 73.0 in May 2011. The 6-month moving average has dropped the past 4 months.

Commentary The Reuters/University of Michigan Index of Consumer Sentiment at 59.4 (revised) in September 2011 above the prior month August low of 55.7, which was the lowest since the Great Recession low of 55.3 in November 2008 and also at 1980 recession levels. Essentially the current reading is at recession level, gloomy sentiment. The index averaged 89 in the five years leading up to the recession that began in December 2007 and ended in June 2009. Not only the short-term trend is decreasing, but even the intermediate-term, long-term, and ultra long-term trends are decreasing.

The prior month August 2011 Index of 55.7 was the lowest since November 2008 (55.3), a 2+ year low, and those were dismal days indeed. Now the September 2011 consumer sentiment has increased, but continues near these low levels. High unemployment, high oil prices, and stagnant wages pushed sentiment down, but the bipartisan deadlock on the U.S. debt ceiling had a devastating, negative impact. In addition, Standard and Poor's downgraded the United States sovereign debt credit rating on August 5 from AAA to AA+. This bipartisan bickering also pushed down the Index in September and October 2010 before the mid-term Congressional elections, but not to this extent. USA consumer sentiment has continued at historically low levels since 2007.

USA GDP Q2 2011 Final Estimate The Bureau of Economic Analysis released the Third Estimate of Q2 2011 GDP which was +1.3% QoQ, for a total GDP of $15.013 trillion (annualized). This is an increase from the Q1 2011 GDP of +0.4% (revised). The Q2 2011 GDP (third estimate) of +1.3% is the lowest since prior Q1 2011 (+0.4% revised) and Q3 2009 (+1.7% revised). However, the GDP has increased for 8 consecutive quarters, since Q3 2009, although growth rates have ranged from a near-abysmal +0.4% in Q1 2011 to an encouraging +3.9% in Q1 2010.

Where is the USA Economy Going? The BigQuestion: where is the USA economy headed? Three scenarios are usually discussed: 1) a double dip recession whereby the GDP will turn negative yet again with a higher unemployment rate, 2) the economy will continue "bottom bouncing" with very slow growth and a continuing high unemployment rate or 3) the bottom is in and GDP growth will accelerate and the unemployment rate will begin to decrease. Scenario 2) with slow economic growth and a continuing high unemployment rate appears to be the consensus for 2011 and 2012, with an annual GDP growth projected of approximately +1.5% or less. The risk of a double-dip recession has increased significantly in 2011, initially because of the spike in oil prices dragging on USA and Global economic growth plus the Japanese earthquake, tsunami, and nuclear crisis disrupting the global economy. Both events occurred in March 2011 and the effects have subsided subsequently. Additional economic, fiscal, and political uncertainties have now increased, including the EU Sovereign Debt Crisis.

USA Real GDP % by Quarter (Chart) The chart below is the annualized percentage change of the Real GDP (seasonally adjusted at annual rate) from the preceding quarter (QoQ), a common GDP measure. An initial negative drop occurred in Q1 2008, but was followed by a positive bounce in Q2 2008. A negative drop into the Great Recession began Q3 2008, followed by a plunge in Q4 2008. The Great Recession continued for 4 quarters until Q2 2009. Positive GDP growth resumed in Q3 2009, the rebound peaking in Q1 2010. The Q1 2010 GDP of +3.9% is now the recent recovery peak. The chart covers the USA Quarterly GDP as reported by the Bureau of Economic Analysis from Q2 2005 through the latest quarter reported.

USA Real GDP $ by Quarter (Chart) The chart below is the Real GDP (seasonally adjusted at annual rate) in total current dollars (annualized). The USA GDP pre-recession peak was Q2 2008 and the Great Recession low was Q2 2009. USA GDP has now increased 8 consecutive quarters. The Q2 2011 GDP (annualized) exceeds both Q2 2008 pre-recession peak and the prior Q1 2011 peak to reach an all-time high. The chart covers the USA Quarterly GDP (annualized) as reported by the Bureau of Economic Analysis from Q2 2005 through the latest quarter reported.

Commentary The Q2 2011 USA Quarterly GDP (final estimate) of +1.3% continues the slow recovery and is disappointing, as expected. We estimated the USA Quarterly GDP QoQ for Q2 2011 as probably +1.5% or less.. The current Q3 2011, the QE 9-30-11, appears from various economic indicators to be as weak as Q2 2011. We now initially estimate the USA Quarterly GDP QoQ for Q3 2011 as +1.5% or less. There is an increasing risk of a recession, a negative GDP, but this does not appear to have occurred yet in Q3 2011.

Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- increased at an annual rate of 1.3 percent in the second quarter of 2011, (that is, from the first quarter to the second quarter), according to the "third" estimate released by the Bureau of Economic Analysis. In the first quarter, real GDP increased 0.4 percent.

The GDP estimate released today is based on more complete source data than were available for the "second" estimate issued last month. In the second estimate, the increase in real GDP was 1.0 percent (see "Revisions" on page 3).

The increase in real GDP in the second quarter primarily reflected positive contributions from nonresidential fixed investment, personal consumption expenditures (PCE), exports, and federal government spending that were partly offset by negative contributions from state and local government spending and private inventory investment. Imports, which are a subtraction in the calculation of GDP, increased.

The acceleration in real GDP in the second quarter primarily reflected a deceleration in imports, an upturn in federal government spending, and an acceleration in nonresidential fixed investment that were partly offset by a deceleration in PCE, a downturn in private inventory investment, and a deceleration in exports.

Final sales of computers added 0.07 percentage point to the second-quarter change in real GDP after adding 0.08 percentage point to the first-quarter change. Motor vehicle output subtracted 0.10 percentage point from the second-quarter change in real GDP after adding 1.08 percentage points to the first-quarter change.

Bureau of Economic Analysis Revised USA GDPs

On July 29, 2011, the BEA announced revisions of the USA quarterly and annual GDPs from Q1 2007 through Q1 2011. The original, final data and the revised data are shown on the chart below. The BEA provides an original 3 estimates (advance, second, third) and periodically revises the third, final estimate. These data and the revisions are the American economic story, subject to change.

Revisions: USA Real GDP % by Quarter (Chart) The chart below is the annualized percentage change of the Real GDP (seasonally adjusted at annual rate) from the preceding quarter (QoQ), from Q1 2008 through Q2 2011. The original Bureau of Economic Analysis GDP data is in blue. The revised Bureau of Economic Analysis GDP data is in red. An initial negative drop occurred in Q1 2008, but was followed by a positive bounce in Q2 2008. A negative drop into the Great Recession began Q3 2008 at the time of the USA Financial Crisis, followed by a steep decline, and bottom, in Q4 2008. The deepness of the Great Recession continued in Q1 2009. The Great Recession continued for 4 quarters until Q2 2009. Positive GDP growth resumed in Q3 2009, the rebound peaking in late 2009 and early 2010. The Q1 2010 GDP of +3.9% is now the recent recovery peak.

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